Racism, Cost-Benefit Analysis, and Trump Advisor Steve Bannon

by James Goodwin

What does Steve Bannon – who, despite his well-documented racism, anti-Semitism, and misogyny, was appointed as president-elect Trump's senior counselor and White House strategist – have to do with a rarified and wonky policy exercise such as regulatory cost-benefit analysis? Unfortunately, a lot, as it turns out.

From a serious policy perspective, the Trump administration's approach to governance remains terra incognita, and this is especially the case with its approach to implementing laws through regulations. So far, Trump has signaled that he has adopted the establishment Republican Party's line on opposing all regulatory safeguards across the board, putting the narrow interests of politically powerful multinational corporations ahead of working families and struggling communities. If and when he follows through, one of the things we can expect is that his administration will continue to subject new agency safeguards to a highly slanted and anti-regulatory test known as "cost-benefit analysis."

Opponents of regulation have long supported the use of cost-benefit analysis because it can be counted on to provide a distorted picture of a regulation's likely impacts by systematically underestimating its benefits while systematically overstating its costs. This distortion occurs because many of the most important benefits, such as preventing premature deaths or bringing an endangered species back from the brink of extinction, are impossible to quantify or cannot be meaningfully captured in dollars-and-cents terms, as is required by cost-benefit analysis. In contrast, regulatory costs – typically to the industries that are polluting water and air for profit, or endangering employees with unsafe work conditions – are always fully accounted for, if not exaggerated. The inevitable result of cost-benefit analysis then is to make even the best regulations look like a bad deal for society.

Starting with the Reagan administration, presidents have sought to give cost-benefit analysis its full anti-regulatory bite by subjecting agency analyses to strict White House supervision. Through a series of executive orders, they have directed an obscure bureau in the Office of Management and Budget (OMB) known as the Office of Information and Regulatory Affairs (OIRA) to review agency rules and use the cost-benefit analyses that accompany those rules to justify blocking, diluting, or delaying pending safeguards. In particular, these orders have empowered OIRA to block an agency from moving forward with a rule until that agency has demonstrated to OIRA's satisfaction, using the biased metric of cost-benefit analysis, that the rule's benefits are worth the costs involved. Too often, making this demonstration involves delay and weakening protections to reduce compliance costs for politically well-connected industries.

This brings us back to Bannon. The general fear is that he'll use his influence in the White House to advance an agenda of prejudice and hate. In cost-benefit analysis, Bannon would find a surprisingly pliable conduit for injecting racism into agency policymaking decisions. And with his future West Wing office located just a few a short steps away from OIRA headquarters, Bannon would have ample opportunity to do just that.

In years past, economists specializing in cost-benefit analysis have studied whether the value of certain regulatory benefits should vary based on the race of the individual receiving the benefit. For example, W. Kip Viscusi has looked at how the "value of statistical life" (VSL) – cost-benefit analysis lingo for the value of preventing one premature death – might differ for whites as compared to African Americans. In a 2003 study, he reported that the VSL for whites is $15 million compared to $7.2 million for African Americans. Incorporating these values unvarnished into a cost-benefit analysis would prompt the conclusion that rules that primarily protect whites produce larger social benefits, and thus make society better off, than would a comparable rule that primarily protects blacks.

Interpreting these results is not quite that straightforward. Instead, they purport to reflect how whites and blacks value their own lives through how they participate in the labor marketplace. In turn, these different VSLs are themselves a reflection of historic and systemic racial discrimination as captured by among, other things, resulting disparities in wealth, educational capital, and bargaining power.

Nevertheless, the bottom line is the same: "Better" regulatory decision-making is achieved when the benefit of preventing the premature deaths of African Americans is treated as worth less money than the benefit of preventing the premature deaths of whites. In this case, "better" regulatory decision-making means one that maximizes economic efficiency. The idea is that by "overvaluing" the benefit of saving African American lives, we risk over-investing in regulations that produce those benefits, which would be an inefficient use of our scarce societal resources.

To some, this means we have an economic theory upon which to base the discriminatory treatment of African Americans (and potentially other people of color). That's deeply troubling and downright appalling. The regulatory response to something like the Flint drinking water crisis provides a vivid illustration of how such discriminatory treatment might play out in regulatory decision-making. The Environmental Protection Agency (EPA) could conclude that to provide safe drinking water resources for urban communities that are primarily inhabited by people of color, only a weak regulation, or perhaps no regulation at all, is all that can be economically justified since the benefits would supposedly be relatively small. The result: consigning an entire city to the lifelong harms of lead poisoning based solely on the race of the majority of its residents.

A Bannon-influenced OIRA might drape such discriminatory regulatory decision-making in the vernacular of neoliberal economics, but that would just be convenient cover for the racist intent that most likely animates it. And the vigorous pursuit of such discriminatory treatment through regulatory decision-making, if that's where Bannon ultimately decides to direct his energies as a White House counselor and strategist, would serve to only further stack the deck against African Americans and other people of color in the United States working to make a better life for themselves, their families, and their communities.

If this all sounds a bit far-fetched, note that this would not be the first time that cost-benefit analysis was deployed, at the direction of OIRA officials, in ways that promoted discriminatory treatment. During the George W. Bush administration, the EPA produced a cost-benefit analysis on a rule to control air pollution from "off-road diesel" vehicles, such as cranes and other large construction and farm equipment. At the behest of OIRA, the agency adopted a VSL for people over the age of 70 that was worth only about 65 percent of the VSL used for people under the age of 70. Through the application of this "Senior Death Discount," as it became known at the time, the lives of people over the age of 70 were deemed to be worth less than those of their younger counterparts.

The justification behind this form of discrimination in cost-benefit analysis is simple math: The elderly have fewer years of life left, therefore less to contribute the economy, so preventing their deaths produces fewer benefits than preventing the deaths of younger people who, statistically speaking, have more years of life remaining. Not for nothing, Trump's pick to lead the EPA's transition team, Myron Ebell, has advocated using the senior death discount in arguing against climate action. He contends that any resulting heat waves from climate change (and in the past he's been steadfast in his skepticism that it exists, despite overwhelming evidence to the contrary) would just kill the elderly "who are likely to die soon anyway."

The use of cost-benefit analysis and OIRA-based centralized regulatory review was always going to be a source of concern during any presidential administration, given the office's historic role in defeating safeguards meant to promote the well-being of families and communities across America. But Trump's election and his early moves since add an entirely new dimension to this debate. Giving people like Steve Bannon – who have espoused troubling views about race, religion, and gender equality – access to these levers of power in the regulatory system raises the specter that regulation might now be used to promote discriminatory treatment of African Americans and other historically oppressed groups.